Designing incentives can be tricky. We've seen how they can go very, very wrong (Wall Street anyone?) Understanding how we humans perceive what is valuable and desirable is an important consideration when designing your program. Crafting just the right mix of required behaviors and subsequent rewards can break behavioral inertia - creating new actions - or eliminating old ones.
A friend of Incentive Intelligence (and a world class influencer in his own right - check out our interview with Brian on Blogtalkradio) - @BrianAhearn posted the other day on how the contrast principle of influence affects our choices, and as we are fond of saying here at Incentive Intelligence - incentives are simply choice architectures.
In his post "A $25 Gas Card or $25 Visa Card – Which Would You Choose?" Brian explains how our brain assigns different values to things with the same value. As an example, he gives attendees in his training sessions a hypothetical choice - a $25 debit card that can be used at a gas station - or a VISA gift card of the same value redeemable wherever VISA is accepted. When Brian recently made this offer to his group, the majority picked the gas card.
He goes on to explain that when we look at this choice start to do some mental calculus and we begin to convince ourselves that the gas card is more valuable. We think about rising gas prices. We think that getting the card now we will get more gas (and more for our money) because surely the cost of gas will rise in the future, therefore, it is worth more today. Fuel is scarce and expensive - therefore, that card is worth more!
The reality is - as Brian points out... the cards are worth exactly the same - $25.
And... the kicker... the thing we don't see immediately... is the VISA gift card can be used for gas.
We aren't always rational. We aren't always logical. We "frame" things based on what is going on around us. When designing incentive programs it is important to understand these nuances of how the mind will perceive the choices (ie: incentives) you put in front of your audience.
As Brian says as he closes out his post...
"Despite the fact that the Visa card is more versatile – dare I say valuable – if I were running an incentive contest I’d offer the gas card for the simple reason that most people think the gas card is more valuable because they’re comparing it to something scarce, something that might go up in price."
It's not always about the "value" of the item in cold, hard, Vulcan terms. Sometimes (no - always) it's about how the audience will perceive the value of that choice.
Humans are weird.
Posted by: Dwane Lay | April 28, 2011 at 08:50 AM
People are strange, when you're a stranger.
Posted by: Glenn Friesen | May 02, 2011 at 04:42 PM
It is interesting to consider that people are known to be irrational, and yet most business decisions are made assuming the opposite.
Is it groupthink, arrogance, egocentrism, or simply more irrationality?
Posted by: Glenn Friesen | May 02, 2011 at 04:45 PM
From my perspective it is continued irrationality. Also a dose of cognitive dissonance. We see the evidence - but we don't believe we'd fall for it so we have a disconnect - add to that our own bias for being right and you have people doing the wrong thing for reasons they think are right. I know - irrational.
We all think we are immune to these types of "tricks" - therefore they don't work - even when there is evidence to the contrary.
FYI - for the record. I did this at an event I just presented at and my group went with the VISA card 10:1 - maybe my group is smarter - or they read this post before I presented. So it isn't fool proof but it is interesting.
Posted by: Paul Hebert | May 02, 2011 at 04:57 PM
We discussed this exact scenario at home this week. My daughter's high school is giving everyone who ride their bike to school this week a donut when they arrive. My daughters eyes grew big as she told us. I asked her if she would ride if I gave her 60 cents, and all I got was a shrug. Talk about perceived value!
Colin, Toronto.
Posted by: Colin Jarvis | May 10, 2011 at 12:03 PM